LAST WEEK, my article ended with the following words: “The next game in town is to stage an economic recovery.” Since then, the Minister of Finance has told the public that the economy is not yet “out of the woods”.

In the Budget of June 2015, the same minister was suggesting that the economy was out of the woods. He said: “Mr Speaker, based on the Central Bank  of Barbados’ [CBB] First Quarter Report 2015, the Barbadian economy recorded its best first quarter performance in two years in 2015, compared to  declines in the first quarter of 2013 and 2014.” This performance came on the back of the best winter tourist season ever.

Furthermore, construction in the tourism sector was expected to fuel economic activity for the rest of the year. In fact, the optimism continued: “As expected  Mr Speaker, the beginning of the turnaround in the Barbados economy, which started from around the last quarter of 2014, has begun to have some impact on the outturn of the fiscal figures.”

The question is, what will constitute an economic recovery given the decline since 2008? If the economy has gone into the woods, then determining whether  it is out will have to be assessed by how far into the woods it went. There is a big question mark over the distance travelled into the woods.

The data being used to measure the distance  has been described as suffering from a number of shortcomings. According to the International Monetary Fund (IMF), “a number of data shortcomings have emerged in recent years”. These shortcomings have been identified because “the Barbados Statistical Service (BSS) compiles the nominal GDP series and  the CBB the real series, and these are not compatible”.

This lack of compatibility is reflected in the CBB suggesting that real GDP since 2008 has declined  by approximately three per cent, while the BSS is suggesting something much closer to 20 per cent. Which one is correct will determine how far into the woods the economy went and therefore the distance required to get out.

It was stated in the IMF 2013 Article IV Consultation that “recently, preliminary constant price [GDP] estimates by industry were completed, and the data are expected to be publicly available in early 2014. From that point, the BSS will be in charge of compiling annual constant GDP data which were previously published by CBB”. It is almost the end of 2015 and the BSS data has not been made public.

Minister of Finance Chris Sinckler stated in his June 2015 Budget that “the single largest issue facing the economy is that economic growth in Barbados remains below the 2.5 to 3.0 per cent that is normal  for our economy. We must get back to normal levels  of growth sooner rather than later”.

Depending on which figure is finally accepted, since 2008 the Barbados economy declined by either three per cent or 0.3 per cent per annum, according to the BSS and CBB, respectively. This is a serious difference that must be reconciled. However, it is instructive that the recommendation to use the BSS statistics has not been accepted.

The issue of economic recovery must be seen in the context of how far the economy has to travel to get out of the woods. If looked at in total distance travelled, the economy must grow by almost 20 per cent  before it can be said to have recovered to the level  of 2007. If looked at in terms of direction, any step  to get out of the woods may be interpreted  as a move to recovery.

In the words of Mr Sinckler, a return to normal growth will mean about 2.5 to 2.0 per cent per annum. In the circumstances, one will have to question  how the Government is targeting economic growth  of approximately one per cent and speaking of recovery in the same breath. The two comments do not reconcile, given what is normal for the Barbados economy and what is required to recover.

Normal economic growth cannot be the single biggest issue in the economy and the Government is pursuing economic policies that discourage growth. For the last seven years, it was difficult to understand the contradiction.

At the start of the recession, the tax policies were designed to raise revenue to reduce the fiscal deficit. Several years later, the tax policies are to reduce spending to protect the foreign reserves. The policies have served to prevent economic growth with the  result that the economy is still not out of the woods.

Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email: [email protected]